Curing Pharmaceutical Distributors' Labeling Ailments
KMD Labeling, Inc. finds a $400,000/year market for printer/applicator and thermal-transfer printing solutions.
The pharmaceutical market can be daunting to any VAR or integrator. A myriad of regulations, manufacturers, packagers, and wholesalers make this market as difficult to understand as a doctor's written prescription. Yet sometimes the only thing you need to understand about a vertical is how to cure its pain points. Take AIDC (automatic identification and data collection) VAR David Bassett, for example.
Bassett is VP of KMD Labeling, Inc. (Tampa, FL), a $1.2 million reseller/integrator started in 1999. Before KMD, and since 1984, Bassett worked in sales for other AIDC VARs where he developed a relationship with MTS Packaging Systems, Inc. (Clearwater, FL). MTS is a manufacturer of packaging products (e.g. equipment for placing pills into foil blister cards) used by national and independent distributors of prescription medicines. The latter supply drugs to healthcare facilities. Today, MTS is Bassett's integrator partner, supplying KMD with leads that account for nearly $400,000 in yearly sales revenue.
Find A Partner For Printer/Applicator Sales
MTS needed a partner with labeling expertise and contacted several VARs, including the company Bassett was working for at the time. However, he soon discovered the printer/applicators (see sidebar on page 88) he was selling were either too expensive for MTS' customers or too complicated for the end users to service. "Some of these printer/applicator systems involved three different vendors: one for the applicator, one for the thermal-transfer printer, and one for the software to make it all work," Bassett explained. "Furthermore, these systems were so difficult to service they required a trained maintenance technician. What MTS' customers needed was a printer/applicator that was simple to service and cost less than $10,000. Some of the equipment I was selling at the time cost nearly twice that amount."
Thus, Bassett discovered two pain points for this portion of the pharmaceutical vertical - high equipment costs and complicated maintenance. Luckily, since he had 18 years of experience in the marking and coding industry, he had a cure for both of these problems.
Match The Automation System To The Market
Bassett was convinced he could sell MTS' customers products from Tharo Systems (Brunswick, OH), a manufacturer of bar code printers, software, and printer/applicators. Unfortunately, his employer didn't offer Tharo products and wasn't willing to add the company to its line card. "I knew Tharo manufactured all of the components of its printer/applicator systems, and I knew those products were affordable for small companies," said Bassett. "I then realized there was an untapped market for selling printer/applicator systems to smaller companies that desired automation equipment. So, I went into business for myself."
After starting KMD (see sidebar on page 90), Bassett met with the COO at MTS and convinced him the Tharo printer/applicators were a good fit for MTS' customers. He did so by first explaining that KMD's starting price for the Tharo printer/applicators was (and still is) approximately $7,000, with a top-of -the-line system topping out at $14,595. Second, Bassett goes on-site for every installation and provides extensive training and troubleshooting education. In the rare case a problem can't be solved over the phone (he doesn't charge for phone support), he developed an optional hot spare program to equip customers with a loaner within 24 hours of a problem. Nine out of 10 KMD customers buy this hot spare contract.
Bassett sells tabletop thermal-transfer printers to customers that don't distribute a large enough volume of pharmaceuticals to warrant a printer/applicator. These customers manually apply labels to the blister packs. However, the thermal-transfer printers provide a much higher quality label (as compared to a dot matrix printer), which is especially noticeable when printing bar codes.
Pharmaceutical Labeling Laws Mean More Business
MTS' customers also wanted a way of printing directly onto the foil blister packs. "Some states have passed reclamation laws that provide a credit for unused drugs," he explained. "To comply with these laws, pharmaceutical distributors need to mark each unit dose with the drug's name, strength, expiration date, lot number, and a bar code with all of this information. I'm starting to sell a lot of unit dose systems because of these laws and because distributors want better tracking of their drugs." For these types of applications, Bassett sells a Tharo A8 thermal-transfer printer equipped with a cutter and a custom-manufactured ribbon that has a special coating enabling the ink to print on the media.
Offer The Database To Feed The Labeling Software
In addition to hardware sales and service, Bassett discovered these smaller companies were willing to invest in a customized database for their pharmaceuticals. "Many of these clients don't have a formalized database, and some of them are dealing with 3,000 different drugs," he said. "So, I designed a program to work in conjunction with Tharo's EasyLabel bar code labeling software. I created everything from what the screens look like to the format of the labels." The program is an ODBC [open database connectivity] database that includes such information as drug names, warnings, bar codes, and tracking numbers. The majority of KMD's pharmaceutical clients purchase this database, which KMD sells as part of a package with a printing system. The cost of the database varies depending on the needs of the customer. Bassett estimates he earns $60,000 year from sales of his software.
No More Cold Calls
Thus far, KMD has sold 15 printer/applicators and 30 foil printing systems to MTS clients. Usually each customer requires a printer/applicator or a foil printing system. Bassett said a pharmacy manager often makes the buying decision for the printing equipment. However, a pharmacy technician is usually the employee using the equipment. KMD's sales cycle ranges from two to six weeks with these customers.
"The majority of my pharmaceutical business comes from referrals and leads from MTS," Bassett stated. "That's enough to keep a small business like mine pretty busy. In fact, I'll have to hire more employees if my business starts to grow beyond 15% each year. But that would be a nice problem to have."